Featured Article: A Financial Earthquake

August 15, 2008

Harvard dramatically overhauled its aid rules. Other colleges had to follow to compete for top students. How to make sense of it all.

By Arian Campo-Flores | NEWSWEEK
Published Aug 9, 2008
Aug. 18-25, 2008 issue

Jennie D’Amico first heard the news in an ecstatic e-mail from her father in Brewer, Maine. It was December 2007—the middle of her sophomore year—and Harvard had just announced a range of new financial-aid policies aimed at easing the strain on middle- and upper-middle- income families like hers. The bottom line for D’Amico’s parents: their expected contribution would plunge from a little more than $30,000 per year to about $13,000. It was, she says, “sort of, ‘Wow, Harvard now costs less for me than the University of Maine’,” where D’Amico had originally thought of going, largely for financial reasons. Until then, she and her family felt as if they were in a “financial-aid black hole,” as she puts it—neither poor enough to qualify for free tuition nor rich enough to easily afford an Ivy League education. (The D’Amicos’ family income is a little over $90,000.) “It’s almost like Harvard is rewarding you for doing hard work.”

Harvard’s major restructuring of financial aid resonated far beyond its walls. Within months, a score of other Ivies and well-endowed schools publicized their own aid overhauls aimed at the same target: middle- and upper-middle-income families overwhelmed by the spiraling cost of higher education. The reactions were swift, impassioned and all over the map. While some hailed Harvard’s move as enlightened, others charged that the university was acting merely out of self-interest—throwing its cash around to nab every possible applicant and also to ward off congressional lawmakers who have been scrutinizing endowment spending at wealthy colleges. Still others worried about the broader consequences for the country’s poor students, as well as for more modestly endowed schools. Wherever observers have come down on the issue, one effect is clear: the financial-aid landscape has inexorably shifted. “When Harvard does something like this, all higher education takes notice,” says Tony Pals, spokesman for the National Association of Independent Colleges and Universities. “It has put the issue of college affordability that much more in the spotlight.”

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